Ready for e-market take-off

As BAE Systems moves to e-enable itself, the defence supplier expects to draw considerable benefits from gaining access to the...

As BAE Systems moves to e-enable itself, the defence supplier expects to draw considerable benefits from gaining access to the aerospace industry trading hub. Julia Vowler reports

If John Donne was right when he wrote, "No man is an island, entire of itself; every man is a piece of the continent," the same is also true of companies - none exists on its own, they are all interlocking pieces of the same economic continent, suppliers and customers to one another in an end-to-end value chain.

At BAE Systems, e-business director Chris Coupland is putting the "e" into the company. "My remit is to e-enable the business across the board," he says. "We have between 15,000 and 20,000 suppliers which, by value and volume, works out at a few hundred major suppliers per site, and we have between 15 and 20 key sites."

Two years into a five-year programme, the first areas to be e-enabled are up and running, with another six to eight scheduled for next year. Fittingly, the pilot project is IT itself - e-enabling the interface between BAE Systems and its global IT outsourcer, CSC.

"We have put all our CSC spend online," says Coupland. "We've got full requisition-to-pay processes for catalogue [procurement], and we're well into rolling out proposal-issuing for things like application development."

The rationale for e-enablement is clear. Coupland wants to establish what he describes as an enterprise-wide "dial-tone" for supply chain management.

"With a dial-tone we can talk in a simple, secure way to our suppliers over the Internet, and conduct transactions with them," he says. "My ultimate goal is to have the supply chain visible on the desktop."

E-enablement should reduce the cost of doing business across the supply chain, argues Coupland, reducing everyone's cost of sale and purchase. It will mean faster, more efficient procurement.

"There will be no reworking, no retyping, because suppliers will have greater visibility into BAE because we'll all be looking at the same information, because it comes from the same source," he says.

Smaller suppliers, which may not be able to afford their own product data management systems, will be encouraged to trade with BAE because they will be allowed [restricted] Web-based access to its product data systems.

But suppliers need not worry, Coupland says. E-procurement is not about "beating up suppliers," though it can "widen competition in some areas", he says. "Because it's easier to use, some suppliers see this as a very good route into BAE Systems," says Coupland.

It also works in the other direction, with BAE as the supplier. "We're working towards a single way of facing off to the Ministry of Defence instead of having many different ways of doing so," says Coupland.

The underlying architecture of e-enabling BAE Systems will create an enterprise application integration layer to serve as a "ring main" for the whole company.

"Like every large company we have multiple enterprise resource planning (ERP) systems. Putting in the ring main allows each business to connect its ERP into it, and the ring main then connects to the external world via Exostar," says Coupland.

Exostar is the e-marketplace set up by the world's major aerospace and defence companies, including US giants Boeing and Lockheed Martin. Because of the
complex and international nature of the business aerospace and defence tend to be highly collaborative, and competitors can find themselves working in partnership with fierce rivals on joint projects that can last years, as with the Eurofighter and Joint Strike Fighter projects.

In the past, says Coupland, such massive projects have required, and justified, having their own dedicated lines and bespoke infrastructure. Moving to browser-based communication will, again, reduce costs all round.

"We're seeing shorter cycle times and better configuration control of data," says Coupland. Joint project management via the Internet, especially for projects which do not warrant their own dedicated inter-company communication infrastructure, is a key advantage. "It is a question of using the Internet in a collaborative project way so we can have more professional project management disciplines and interactions between suppliers.

"We will be able to have virtual meetings and monitor milestones, securely, and then close down the project professionally at the end.

"We will deepen our relationships with suppliers because though there will be less face-to-face communication, there will be much greater frequency of interaction and more common data and documentation," he says.

Other companies in the defence industry are becoming e-enabled, and all are at different stages of maturity and specialisation. "We all lead the way on certain things," says Coupland. "In the US, because of the distances, they have more on-line meetings than in the UK. Our culture hasn't got there yet. But I would challenge anyone to find any company that's further ahead on [Web-based] catalogues."

The company is also using Exostar internally between its own business divisions. "We do not want multiple trading systems," says Coupland.

His goal is, "To have broken the back of e-enabling the business within three to five years - when 80% of transactions, buying and interaction on projects will be e-enabled. We have moved out of the evangelical phase, and into pilot testing and engaging business," he said.

Meanwhile, Donne's 17th century understanding of interconnectedness finds an unexpected echo in 21st century e-technology.

Benefits of the e-marketplace
  • It is easier and simpler to trade with suppliers and customers over the Internet, via cheap desktop Web browsers. This reduces costs to everyone, bringing benefits to the whole supply chain

  • Because there is only one source of data, and the whole transaction is visible on the Internet, there is less error and less reworking

  • Smaller suppliers, which may not be able to afford expensive product data management systems, can see into approved areas of BAE Systems' product data management systems, making it easier for them to trade with the aerospace giant

  • Internet auctions can be used to flush out timely "windows of capacity" among suppliers, speeding up the procurement process

  • The Internet can be used for collaborative project management on complex joint bids, making project management more efficient and less costly

  • BAE Systems' own internal businesses can also use the Internet infrastructure to trade and communicate among themselves

  • Internet-based supply chain management speeds up the procurement process, which can be crucial for meeting deadlines

  • Being e-enabled may help to win business. BAE Systems is hoping that its e-enabled spares and support division may win business from the Ministry of Defence looking to outsource its own spares and support procurement.

Coupland's rules for e-enablement
  • Focus on the processes, rather than the technology

  • Engage the supplier base - there must be advantages for them

  • Choose champions who are keen on proving its success, which will get others to follow.

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